Complementarity of capabilities across cultures

Abstract

Purpose The purpose of this paper is to investigate how service firms across two different cultural contexts use their customer involvement capabilities to create competitive advantage. The study further assesses the possible complementarity effect of innovation and involvement capabilities in enhancing firm competitiveness. Lastly, the study draws on the complementarity of capabilities and social institutions to examine whether different cultural contexts explain the use of involvement capability among service firms. Design/methodology/approach The study sampled service firms from an emerging economy (India) and high-income economy (The UK), which have different cultural contexts (collectivism/individualist) to assess the hypothesized relationship. Data collection processes were adapted to the contexts to optimize reliability and relevance. Multi-group structural equation modeling was used in analyzing the data. Findings The study finds that cultural contexts explain the positive relationship between customer involvement capability and firm competitiveness such that in collectivist cultures, involvement capability is more positively related to competitiveness but negative in individualistic contexts. However, in both contexts, service firms can through capability bundling increase firm competitiveness. The study found that the complementarity effects of innovation and involvement capabilities were found to be positive in both contexts. Originality/value This study departs from previous studies by arguing that customer involvement is a complementary capability that helps exploit the potential of innovation capability of service firms. This study further demonstrates that cultural context defines the effectiveness of involvement capability in achieving firm competitiveness.